Kathmandu

1 Day / 15 Speakers
3 Moderators / 100 Enthusiasts
TODAY MEETS TOMORROW

January 9, 2019

Future of SMEs of Nepal | CEO Unplugged 2019

January 20, 2019 by CEO Unplugged0
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This first panel discussion of CEO Unplugged 2019 organized by Glocal Pvt. Ltd. was Future of SMEs of Nepal. Addressing the challenges faced by Nepalese SMEs, the panel’s main objective was to discuss how today’s young entrepreneurs can uplift the scale of SMEs and contribute in the economic progress of the country.

CEO Unplugged 2019 is a yearly forum organized by Glocal Pvt. Ltd. comprising series of panel discussion to establish a forum to discuss about contemporary business challenges, opportunities and futuristic view with a sight of experiential learning to the new comers in the business and students with an objective “Today Meets Tomorrow”.

The first panel discussion comprised of panelist; Sunita Nhemaphuki, the Co-Founder of R&D Innovative Solutions; Sixit Bhatta, the CEO of Tootle; Sushma Sharma, the First Vice-President of NWC SME  and moderator; Rohit Tiwari, CEO at Foodmario.

Rohit Tiwari asked these specialists about their insight of challenges for SMEs like in the field of agriculture, technology, finance and how far has Nepal been able to cope up with them during the course of time. He warmed up the discussion by adding various queries regarding the decreasing rate of country’s independency over foreign productions; correlation between HR and technological advancements and depth information on financial policies for new entrepreneurs entering the market.

 Sunita Nhemaphuki, the Co-Founder of R&D Innovative Solutions

Sometimes, data is right. But do we have to believe in it or not? How data is produced is the main thing. Yes, data is showing that we are relying for ‘Sun Dekhi Noon Samma’ from other countries. But why? This is the main thing I want to ask. Because we are not organized. There is a huge gap between production and consumption pattern. See, you are in the food business. What kind of product are people demanding and what are we producing? We are producing traditional products like rice, maize and so on. But people are demanding popcorn. They are demanding pizza. Now the food habits have changed. And what product we produced are not getting the market. Because we are not able to make beautiful plate with that resources. Who can make a demanding recipe from Kodo?

On the other hand, when we talk about agriculture industry as a raw materials, it’s all about the quantity. It’s so easy to get corn from Argentina than to collect from our farmers because of our geography, transportation system and many things. So, because of easiness, the data is decreasing but if we change and see the entrepreneur-journey on this, it won’t take even one year to rise as every three months, we get returns from agriculture sector. You don’t have to wait every three years, four years like of other businesses. Sometimes in some products, you can get results in every one months. If we want to change our economy, the first thing we have to do is throw a seed. After 15 days, we will get the plant.

Likewise, let’s talk about apples. Guys, if you really demand for nepali products, then after two years, you will get nepali apples all over the country. After two years, you will get kiwi from Nepal itself. Now, what we produce is the small kiwi which we don’t like and import big ones from Netherland. So, some of our small SMEs entrepreneurs have started making those big kiwis. It’s a time to think next way. Lets not only talk about Horticulture. If we see the pig rearing, pork is the best consuming products all around the world. If we try and give small attention to this field, then we can export the pork. Another problem is the have private properties. I am from a Newari family, so whenever there are two sons, they divide their land. So the cultivable land is too small. Use of technology is necessary to improve level of production for this problem.

It’s been ten years that I am working in the agriculture sector and I believe that young entrepreneurs should focus on how they can provide market to the producers. Do you believe or not, SMEs provide 96 percent of job opportunities in Nepal. I did my degree from Bangladesh and when I was a student, people there asked me “How is it possible to be self employed by every people in Nepal? There is lots of money movement going on.” So we have to think about this issue for scaling up, then only we can stop importing many things. But if we start to work only in production, then it will be a big disaster in agriculture. See, when we see the students doing MBA discussing about what to do in agriculture, most of them think about growing plants like tomatoes. If we don’t change this kind of schooling where agriculture is linked with only production, then we will fail. Agriculture also need marketing, management and designing.

Another problem is that there is no contract farming law in Nepal. There is no strong and specific labour law or investment law in this sector. Similarly, whenever the farmers apply for the loan, they are asked for the stock and balance sheet. But for a farmer, there is no stock because they have to do the rapid sales after the production. When we pitch for the foreign or national investment, they think that agriculture is like the another industry. Set the factory and start the production. This is not true. We have to deal with various natural factors too. Agriculture is a investment consuming sector. If I ask how many of you know the agriculture, most of you will raise your hand. But, If I ask how many of you know the banking, only few of you will raise your hand. The investor should also consider agriculture to be a profitable product, a secured margin product. I request the investors to invest in big volumes and for the long terms. For last three years, there was a policy for 5% subsidy in agriculture products. So, there is more opportunities in this sectors. I want to request people like Sixit Ji and others, that this sector requires more techno entrepreneurs and commercial approach. We need management students. We need financial analysis on this.

 Sixit Bhatta, the CEO of Tootle

SMEs were the concept of 70s and 80s. Let’s keep the records straight. I think we don’t have the problem with technology, but the problem with the mindset. We have the scared mindset. Therefore, I still like to challenge the topic SMEs here. Why because, traditionally, Nepal is a country where we never like to scale up. That’s why we have SMEs. You talk about tourism potentiality for last so many years since I was born, and we never scaled it up. What is the fundamental difference between Thailand and Nepal? We have more things to offer. Why is scale there and why don’t we have here? We have heard so many potentiality. Who said we have the potentiality of 83000 MW and I don’t know whether it’s true or not. But we have claimed that we have tremendous potentiality in our hydropower and have failed to scale it up. If we look at the airport, we have the same airport 30 years back with just slight increase in infrastructures. So, there is a difference between a SME which is more like a startup. You know, you are satisfied with small things like I start a hotel in Pokhara and become a SME. But the challenge here is that we have been fascinated by a dream of having a start up and not scaling that up. So we don’t have a mind set up to scale. What we can do with technology is that we can scale things. What we can do with technology in agriculture? We can scale agriculture. What we can do with technology in tourism? We can scale tourism. What we can do with technology in mobility? We can scale mobility. So it’s not about how we challenge with the technology or not.

We can build the technology because it’s the means to the end. It’s not the end itself. But what it does allow is that, it scales the things up. We all have been fascinated with this dream of making a burger. If I were to ask, and this is the narrative that I have build, how many of you can make the better burger than the McDonald’s, then I am sure that many of you can actually make burger better than McDonald’s. But making a burger better than McDonald’s and creating a  McDonald’s itself is entirely two different things. And let us keep these records straight, it’s not about making one or two burgers, it’s about creating the scale. This is what I envisions for Nepal and we have so much potentiality that an scale up the things.

This uncart report for entrepreneurship and livelihood came around couple of months ago. If you look at the report, you have some interesting facts. 70% employment that is generated in the least development countries, in Nepal being one of them, is through entrepreneurship. That number decreases to 50% for the developing economies. And it’s only 14% for the developed economies. Now what does it mean? It means, we tend to confuse livelihood with entrepreneurship. So if there is a Chiyapasale who is selling Chiya, he is doing his livelihood. If there is a Chiyapasale who is opening 100 of Chiya stores, than that’s entrepreneurship which means that this number has to come down. Now why that happens? Unfortunately, we are again so fantasized and romanticized with this concept of entrepreneurship that if you are a chef in a restaurant, in a couple of years, you feel that you can open a restaurant. If you are an engineer working for a technological company, you think that I will have my own start up because I can make things better than you do. But trust me, knowing to make a burger is entirely different from running a restaurant.  We need to make sure that we need to consolidate things. If there is a start up happening, agriculture happening, we need to scale thing up. Therefore I pledge, we should scale up companies. The American economy is run by Google, Amazon and Tesla. Why? Don’t you think, there would be hundreds, even thousands of employees in Tesla who could have their own startups? So our livelihood and entrepreneurship, are two different things. And that scale can also happen in agriculture. Like how?

Last couple of months, I was in Cenego, speaking in an event like this organized by UNCDF. In my panel, there was this person from JB finance, China. And there were some very interesting things coming up for agriculture. You know, the use of technology in agriculture in China has been amazing. So what they have done and what they could still do here is like AI is going to be big. So they have these cameras in bigger yields. Now unfortunately, what happens with the big farm is that there is lots of bullies happening here and there. If there is a big pig, it would eat lots of the food and rest of the pigs will not have anything to eat and will not be able to grow. So what they have done is that they have placed the cameras. And you would be surprised to know that pigs, like humans, have different faces. We won’t be able to recognize it but the AI will. What they will do is with the facial recognition algorithm, they will know which pig has eaten how much and with some kinds of robotics, they will control the pigs. Now this reduces the costs and increases the productivity. And I think in this point of time, if you see entrepreneurs and technology, technology can become a very important mean to scale up agriculture. And if you were to ask me where I would run a startup next, I would definitely put my bet on agriculture because there is so much to offer in agriculture.

Sushama Sharma, the First Vice-President of NWC SME 

As for having a banking experience, I can say something on this. When I was a banker, I always wondered why SMEs, MMEs and Microfinance were charged with higher rate of interest. But now, the time has changed. Before, the government was not strong and currently, NRB has brought some policies that they have to invest in subsidies. Yesterday, I saw some government banks like Nepal Banijya Bank has come up with 3.33% interest loan for women entrepreneurs. So that is a very good initiation. And there is also another private bank coming up with the 7% loan and they are coming up with different policies like loans without collaterals also. They are bringing loans for startups and Mahila Samridhi loans. So maybe all the 27 banks and other financial institutions will come up with NRB policy that they have to invest 20% investment in this SMEs sector.

Today, we can get 3.3% nominal rates. Before there were complications. And what Nepal Women Chamber can do is, we are liaising with some of the banks to bring some kinds of products for women entrepreneurs in different service charges, without collateral and lower interest rates. So, we will give that platforms to our members. As a member of Nepal Women Chamber, we cannot give the loan but we do the liaison work with the banks.

Associating with Sixit Ji and Sunita Ji, we are not able to supply immediately what is demanded.  Scale up! This is very important for the Nepal, you know. Recently one thing happened in Nepal Women Chamber too, some foreigners are offering us to send some proposals but we are getting just 12 applications and those SMEs don’t have any websites because of which, it’s difficult for us to introduce them in the global market. First you have to think whether you want to sell your product for NRs. 100 in local market or $100 in international market and scale up accordingly.

Currently, Women Chamber has 100 entrepreneurs and what I have found with the experience of banking is that, there is lots of gap between entrepreneurs and banks. So, we are trying to bridge that gap. For employment generation, all SMEs, MMEs and Microfinance play a vital role. If we see the GDP of the service sector, it is increasing but in other sectors, the GDP is declining. So, we have to be focused and the government should come up with some strategies regarding subsidy as well as technical support.

Audience Question

While scaling up, how SMEs can have a proper management with factors like finance?

Sixit Bhatta: When you start up, you start with the energy of youths. But when you scale up, you  need structures. You rightly asked that there is a challenge while moving up from a startup to scale up. Scale up requires more focus, more constitutionalized procedures that can make the organization more resilient because when you scale up, you grow. When you grow, there are so many notes that you hit in terms of regulations, accounting, finance, marketing and things like that. So as the company moves from startup to scale up, it moves from speed boat to big ship. And there is a challenge. When you become a big ship, you become more bureaucratic. Therefore, as a leader, entrepreneur, what you have to do is you need to have a big ship with Gevity. That is a management practice. That requires innovations. That requires structures, how things are done.

There is another challenge in Nepal. Unfortunately, we have lots of influence on startups from development agencies; multilateral and bilateral, because the model of philanthropy and NGOs is almost over for them. Therefore, they want to have their foothold in startup because that’s what trending. That can also lead to a death trap for start ups because like I said, making a burger and creating a Mcdonald’s. Now what these agencies do, is they will let you make a burger and write a report on how burger is made, rather than helping them to scale up the companies. So, we are at a very vulnerable stage about how we should play our cards. Therefore to scale up, creating structures, creating process is important and meantime it’s really important to be focused.

If we could widespread agriculture in terms of organic farming, will it be more challenging or beneficial for the economy?

 Sunita Nhemaphuki: There is always a debate on how we should drive our agriculture. Whether to produce organically or IPM. The thing is whether we have the market for that or not. In agriculture, you need to see the marketing in the opposite way what you studied in the university. You need to make first market, tie up with the producers, and go down with production. So market is a must.

Conclusion

The panel discussion vocalized the importance of scaling up the SMES and incorporating it with technologies to create a better economy and employability rate.

Key Learning

If you believe, do it; do it by yourself


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